The investment committee of the $101 billion Massachusetts Pension Reserves Investment Management board voted Jan. 30 to recommend a commitment of up to $500 million to an actively managed U.S. large cap equity strategy managed by Rhumbline Advisers.
Funding for the strategy would come from shifting a little more than 2% of PRIM's $20.8 billion allocation to passively managed S&P 500 exposures.
Boston-based PRIM, like many big institutional investors, has favored low-cost, passive exposures to U.S. large cap equities, reflecting a conviction that the market's efficiency makes it challenging for money managers to add value.
But Michael McElroy, PRIM's director of public markets, addressing the Jan. 30 meeting, said that over the past three years, his team has been thinking about "ways that we could enhance this area and get additional value (for) the fund" from that large pool of assets.
The Rhumbline strategy — combining a top-down monetary policy regime indicator with a bottom-up stock selection model, designed by Economic Index Associates, a New York-based index design company – is the first to be identified as a target for adding value to PRIM's huge U.S. large cap equity exposure.
In response to a committee member's query regarding how big the actively managed portion of PRIM's U.S. large-cap holdings could become, McElroy said that for now his team will monitor how the Rhumbline strategy performs.